Green v. Ameritrade, Inc.

• Citation: 279 F.3d 590
• Decision Date: 01 February 2002
• Docket Number: No. 01-1251.,01-1251.
• Parties: Mitchell C. GREEN, an individual, and on behalf of himself and all others similarly situated as a private attorney general, Appellee, v. AMERITRADE, INC., a Nebraska Corporation; Ameritrade Holding, Corp., a Delaware Corporation, Appellants.
• Court: United States Courts of Appeals. United States Court of Appeals (8th Circuit)

279 F.3d 590

Mitchell C. GREEN, an individual, and on behalf of himself and all others similarly situated as a private attorney general, Appellee, v. AMERITRADE, INC., a Nebraska Corporation; Ameritrade Holding, Corp., a Delaware Corporation, Appellants.

No. 01-1251.

United States Court of Appeals, Eighth Circuit.

Submitted: October 15, 2001.

Filed: February 1, 2002.

COPYRIGHT MATERIAL OMITTED

COPYRIGHT MATERIAL OMITTED

Robert J. Kriss, Chicago, IL, argued, for appellants.

Mark A. Ozzello, Los Angeles, CA, argued, for appellee.

Before BOWMAN, BRIGHT, and HANSEN, Circuit Judges.

BOWMAN, Circuit Judge.

Ameritrade, Inc., and Ameritrade Holding Corp.¹ appeal from the District Court's² order remanding Mitchell Green's amended complaint for breach of contract to the district court of Douglas County, Nebraska. Ameritrade removed Green's original complaint to federal court pursuant to the complete preemption provision of the Securities Litigation Uniform Standards Act of 1998 (SLUSA), Pub.L. No. 105-353, 112 Stat. 3227 (codified at 15 U.S.C. § 78bb(f) (Supp. V 1999)). Green then amended his complaint and the District Court determined that SLUSA no longer applies to the claim pleaded in Green's amended complaint. In the absence of mandatory federal jurisdiction under SLUSA, the District Court exercised its discretion to refuse supplemental jurisdiction over Green's state-law claim. Ameritrade appeals, and we affirm.

I.

Ameritrade provides online securities price information and stock brokerage services. In addition to providing stock price information related to individual online trades, Ameritrade offers its customers, for a twenty dollar monthly fee, its real-time quote service. This service allows a paid subscriber to receive "real time, last sales information [for] up to thirty five [sic] (35) stock or option symbols at a time with the same one click of the mouse or hit of the enter button." Class Action Petition ¶ 10. "Real time, last sales information" describes the delivery to Ameritrade subscribers of a composite of the most recent price paid for a stock or option.

Mitchell Green subscribed to Ameritrade's real-time quote service in February 1998. In March 2000, Green sued Ameritrade in the Douglas County, Nebraska, district court. Green sought to bring the suit as a class action on behalf of "[a]ll persons classified as Nonprofessional subscribers who have paid $20 per month for real time `last sales information' with defendants Ameritrade, Inc. and Ameritrade Holding Corp. to obtain last sales information or real time market quotes for stocks or options." Class Action Petition ¶ 3.<sup>3</sup> Green alleged in his complaint that Ameritrade did "not provide its real time quote subscribers with actual real time, last sales information with respect to `option' quotes." Class Action Petition ¶ 12. Green asserted that the actual quotes provided lagged "up to hours behind the actual last sale of a particular option on any and all exchanges." Id. He further alleged that Ameritrade led subscribers to believe that the option quotes were obtained from all option exchanges and market makers, though in fact they were not so obtained. Finally, and significantly, Green's complaint alleged that real-time quote service subscribers "are making investment decisions to purchase or sell options based upon stale last sale information." Id. Upon these facts, Green brought state-law claims for breach of contract, fraud by intentional misrepresentation, fraud by negligent representation, deceptive trade practices, and violation of the Nebraska Consumer Protection Act.

Ameritrade timely removed Green's suit to federal district court and moved to dismiss Green's complaint as preempted by SLUSA. In reply to Ameritrade's motion to dismiss, Green moved to remand the action to state court. Relying on Green's allegation that subscribers made "investment decisions to purchase or sell options based upon stale last sale information," the District Court concluded that Green's "case deal[t] with the purchase or sale of securities" and Green's complaint was therefore preempted by SLUSA. The District Court denied, however, Ameritrade's motion to dismiss, and gave Green thirty days to file an amended complaint.

Green subsequently filed an amended complaint, purporting to state a single claim for breach of contract under Nebraska law. The factual allegations of Green's amended complaint differed from his initial complaint in two significant ways. First, instead of alleging that Ameritrade falsely represented that its real-time quote service provided stock and option last-sale information from all stock exchanges and market makers, Green alleged that Ameritrade promised in the "Real-Time Quote Agreement" that it would provide that information to subscribers, including Green, but failed to do so. Second, Green removed all references to any investment decisions to purchase or sell made by subscribers in reliance on this allegedly faulty information. Green's amended complaint alleges only that Ameritrade's contract said it would provide a certain kind of price information, Ameritrade did not in fact provide that information, and Ameritrade therefore breached its subscriber agreement.

Ameritrade moved to dismiss Green's amended complaint on the ground that it too is preempted by SLUSA. Green responded and moved to remand the amended complaint to state court pursuant to 28 U.S.C. § 1447(c) (1994 & Supp. IV 1998) for lack of subject matter jurisdiction. The District Court determined that the amended complaint did not allege that Ameritrade misrepresented or omitted a material fact or used a manipulative or deceptive device or contrivance. The court concluded that SLUSA therefore did not cover the substance of Green's suit. The court also concluded that even though Green's amended complaint dropped all federal claims, the remaining claim was still subject to the court's supplemental jurisdiction if the court chose to invoke it. Exercising its discretion, the court chose to remand the case to the state court. See 28 U.S.C. § 1367(c) (1994).

II.

Although the parties have not raised any question about our power to hear this appeal, we must in the first instance satisfy ourselves that we have jurisdiction to review the District Court's remand order. Although as a general rule 28 U.S.C. § 1447(d) "prohibits appellate review of an order remanding a case to state court," In re Atlas Van Lines, Inc., 209 F.3d 1064, 1066 (8th Cir.2000), there are exceptions. Where, as here, the District Court's remand order is based on its authority under 28 U.S.C. § 1367(c), the prohibition of review on appeal found in § 1447(d) does not apply. See Things Remembered, Inc. v. Petrarca, 516 U.S. 124, 127, 116 S.Ct. 494, 133 L.Ed.2d 461 (1995) ("[O]nly remands based on grounds specified in § 1447(c) are immune from review under § 1447(d)."). The District Court had federal question jurisdiction over the complaint removed from state court by Ameritrade because it was SLUSA-preempted. See Caterpillar Inc. v. Williams, 482 U.S. 386, 393, 107 S.Ct. 2425, 96 L.Ed.2d 318 (1987) (explaining basis for federal court jurisdiction where complete preemption exists). Green's amended complaint alleges a state-law claim for breach of contract that was pleaded as part of the larger original complaint. After Green's amendment of his complaint, the District Court still had supplemental jurisdiction over this state-law claim and therefore appropriately considered whether to exercise its discretion to retain the claim in federal court under § 1367. See Carnegie-Mellon Univ. v. Cohill, 484 U.S. 343, 346, 348-49, 353-54, 108 S.Ct. 614, 98 L.Ed.2d 720 (1988); St. John v. Int'l Ass'n of Machinists & Aero. Workers, 139 F.3d 1214, 1217 (8th Cir.1998); Petkus v. Chicago Rawhide Mfg. Co., 763 F.Supp. 357, 360-61 (N.D.Ill.1991). We therefore are not barred by § 1447 from reviewing the District Court's remand order, and we have jurisdiction to consider the merits of Ameritrade's appeal. St. John, 139 F.3d at 1216-17.

III.

Our review of the case law has revealed only one case in which this Court has had the opportunity to examine SLUSA's provisions, see In re BankAmerica Corp. Sec. Litig., 263 F.3d 795 (8th Cir. 2001) (upholding injunction staying state-court proceedings because injunction fell within exception to Anti-Injunction Act), but our discussion in that case has no bearing on the issues raised in this appeal. We turn to a recent case from a federal district court in Minnesota explaining, quite accurately, we believe, that Congress designed SLUSA to close a perceived loophole in the pleading requirements of the Private Securities Litigation Reform Act of 1995 (PSLRA), Pub.L. No. 104-67, 109 Stat. 737:

In recent years, Congress passed two statutes designed to alleviate the problems corporations suffered as a result of class action lawsuits. The first of these, the PSLRA, was designed to curb abuse in securities suits, particularly shareholder derivative suits in which the only goal was a windfall of attorney's fees, with no real desire to assist the corporation on whose behalf the suit was brought. The PSLRA immediately drove many would-be plaintiffs to file their claims in state court, based on state law, in order to circumvent the strong requirements established by the statute. Motivated by [a purpose] to keep such lawsuits in federal court, Congress quickly passed SLUSA in order to "prevent plaintiffs from seeking to evade the protections that federal law provides against abuse litigation by filing suit in State, rather than federal, courts." With some exceptions, SLUSA made the federal courts the exclusive fora for most class actions involving the purchase and sale of securities. Primarily, SLUSA mandates that any class action based on an allegation that a "covered security" was sold [or purchased] through misrepresentation, manipulation, or deception shall be removable to federal court.

In...